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Anti-Assignment Provision Must Specifically Apply to Healthcare Service Providers

A surgery center in Houston sued a self-funded, employer-sponsored group health plan under an “Assignment of Benefits and Designation of Authorized Representative.” The U.S. District Court for the Southern District of Texas denied the plan’s motion to dismiss, stating that the plan’s anti-assignment clause did not prohibit assignments of benefits claims to healthcare service providers. These types of demands by out-of-network providers are increasingly common and becoming more burdensome than just a nuisance for employers that sponsor self-funded plans subject to ERISA. Such employers are encouraged to review their plans’ anti-assignment clauses to ensure they specifically apply to certain types of healthcare service providers. In this case, the court’s order did not discuss whether the parties had raised the issue concerning the right of the provider to continue litigation as the participant’s authorized representative, even if the anti-assignment clause was found to be applicable to such provider. The court order… Continue Reading

IRS Issues Proposed Regulations Targeting Management Fee Waivers by Private Equity Funds

The Internal Revenue Service (the “IRS”) recently released proposed regulations providing that certain arrangements in which a service provider receives allocations of a partnership’s underlying income may be treated as compensatory payments for services under the Internal Revenue Code (the “Code”).  In releasing such regulations, the IRS is attempting to crack down on certain “management fee waiver” practices by private equity firms which try to convert management fees into profits interests in order to get capital gains treatment on such income as opposed to ordinary income treatment.  The proposed regulations provide a facts and circumstances test and factors to evaluate whether an arrangement should be treated as a disguised payment for services.  An arrangement that is recharacterized as a disguised payment for services under the proposed regulations will be treated as such for all purposes of the Code.  Such payment will be subject to tax at ordinary income tax rates,… Continue Reading

HHS Settlement Reminds Covered Entities of Obligations and Potential Penalties under HIPAA

The U.S. Department of Health and Human Services (“HHS”) recently entered into a Resolution Agreement with St. Elizabeth’s Medical Center (“SEMC”) to settle charges that SEMC violated HIPAA by failing to implement sufficient security measures to safeguard protected health information (“PHI”) when using certain Internet-based document sharing applications. In addition, SEMC allegedly failed to timely respond to, and mitigate damages caused by, the breach of unsecured PHI on an employee’s personal laptop and thumb drive. As part of the settlement, SEMC agreed to pay HHS nearly $220,000 and to a corrective action plan under which SEMC must, among other things, review and revise its HIPAA policies, procedures, and training; retrain its workforce who have access to PHI; and submit to certain other reporting and record retention requirements. Employers that sponsor group health plans, in consultation with legal counsel, should undertake a review to ensure full compliance with HIPAA’s privacy and… Continue Reading

New Australian Employee Share Scheme Tax Rules Effective July 1, 2015

Several changes to the Australian employee share scheme tax rules became effective July 1, 2015. As enacted, the new rules reverse certain rule changes made in 2009 and provide for (i) deferring taxation of options until the time of exercise, rather than upon vesting; (ii) extending the maximum tax deferral period from seven years to 15 years from the acquisition date of a share right; and (iii) increasing the maximum share ownership limit used to determine eligibility for tax deferrals on share rights from five percent to 10 percent. In addition, the new rules provide certain tax concessions for employees of small start-up companies. Additional information on the new tax rules is available on the Australian Taxation Office’s website here.

IRS Proposes to Eliminate Lump Sum Cashout Windows for Defined Benefit Plan Retirees in Pay Status

In Notice 2015-49, the IRS announced that it proposes to amend the Treasury Regulations under Section 401(a)(9) of the Internal Revenue Code, effective as of July 9, 2015, to prohibit defined benefit plan sponsors from amending their plans to offer a lump sum cashout window to participants already in pay status. The announcement does not affect lump sum cashout windows for participants who are not already in pay status. Notice 2015-49 contains limited exceptions for cashout windows (i) that received a favorable private letter ruling before July 9, 2015; (ii) that were adopted or authorized by an entity with authority to amend the plan before July 9, 2015; (iii) that were adopted pursuant to a collective bargaining agreement in place before July 9, 2015; or (iv) for which participants received a written notice before July 9, 2015, communicating a definite intent to offer a cashout window. IRS Notice 2015-49 can… Continue Reading

Proposed Rules Requiring Companies to Adopt Clawback Policies on Incentive Compensation

As required by Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the U.S. Securities and Exchange Commission (the “SEC”) recently proposed rules directing national securities exchanges and associations to establish listing standards requiring companies to adopt clawback policies. Under the proposed rules, companies would be required to develop policies that, in the event of an accounting restatement, recoup from certain current and former executive officers incentive-based compensation they would not have received based on the restatement, regardless of fault (i.e., no misconduct required). Such clawbacks would apply to excess incentive-based compensation that is tied to accounting-related metrics, stock price, or total shareholder return (with such excess determined based on an estimate of the effects on stock price or shareholder return if correct financial statements had been issued) and would apply to excess compensation received within a three-year look-back period. Companies would have discretion, however, not to… Continue Reading

States Must Perform and Recognize Same-Sex Marriages

The U.S. Supreme Court held last week, in Obergefell v. Hodges, that the U.S. Constitution requires all states to perform same-sex marriages and recognize same-sex marriages lawfully performed in another state. We recommend employers review their employee benefit plans to determine whether they offer coverage to all legally married couples. Additionally, employers may want to consider whether to continue offering domestic partner benefits. Obergefell v. Hodges, No. 14-556, ___ U.S. ___ (June 26, 2015) can be found here.

U.S. Supreme Court Upholds Subsidies on Federal Exchanges

The U.S. Supreme Court held last week, in King v. Burwell, that federal subsidies are available under the Affordable Care Act (“ACA“) to purchase health insurance on a federal exchange. A federal exchange operates in states that have not set up state exchanges. The ACA states that federal subsidies are allowed for taxpayers who meet certain requirements and have enrolled in an insurance plan through “an Exchange established by the State.” IRS regulations had interpreted this provision to make federal subsidies available regardless of whether the exchange is established and operated by the state or the federal government. The Court decided that, although the plain-meaning arguments were strong, the ACA’s context and structure compel the conclusion that federal subsidies are permitted with respect to insurance coverage purchased on any exchange-federal or state. This means business as usual for employers, including managing ACA penalty risks and preparing for the onerous reporting… Continue Reading

Ensure Conveying Discretionary Authority in Plan When Outsourcing Appeals

The FedEx long-term disability plan provided that FedEx would appoint an appeal committee to review appeals and grant this committee with discretionary authority. FedEx claimed that Aetna was appointed as the appeal committee because the FedEx board of directors disbanded the prior appeal committee when the board decided to outsource appeals to Aetna, and FedEx and Aetna amended their service agreement accordingly. The plan did not contain a process for appointing the appeal committee, and the court found that, in order to comply with the plan, the board needed to actually designate Aetna as the appeal committee and there was no evidence of this. Accordingly, the U.S. Court of Appeals for the Fourth Circuit affirmed the district court’s decision to review the denial of long-term disability benefits de novo because the participant’s claim was not reviewed and denied by an entity with discretionary authority over appeals. Bilheimer v. Fed. Express… Continue Reading

IRS Releases Draft ACA Reporting Forms and Guidance on Electronic Filing

The IRS recently released the following draft forms that employers will use to report certain information required by the Affordable Care Act (the “ACA“): Form 1094-B (Transmittal of Health Coverage Information Returns); Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns); Form 1095-B (Health Coverage); and Form 1095-C (Employer-Provided Health Insurance Offer and Coverage). For more information on these forms and reporting required under the ACA, please see our prior newsletter post here. These ACA forms must be filed electronically with the IRS on the new Affordable Care Act Information Return (“AIR“) system, rather than on the Filing Information Returns Electronically (“FIRE“) system that is used to file other returns with the IRS. Employers that intend to directly file using the AIR system, rather than having a third party file on their behalf, should review the new IRS guidance on the AIR system to ensure that the employer can submit… Continue Reading

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